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Item 7. Management’s Discussion and Analysis

2026-02-12 compared with 2025-02-14 · 132 added, 130 removed, 248 unchanged (51% of the section changed)

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The Company is a leading independent provider of equipment and technology to the upstream oil and gas industry.

With operations in approximately 551 locations across six continents, NOV designs, manufactures and services a comprehensive line of drilling, well servicing and offshore construction equipment;

With operations in approximately 503 locations across six continents, NOV designs, manufactures and services a comprehensive line of drilling, well servicing and offshore production and construction equipment;

sells and rents drilling motors, specialized downhole tools, and rig instrumentation;

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and provides expendables and spare parts used in conjunction with the Company’s large installed base of equipment.

NOV also manufactures coiled tubing and high-pressure fiberglass and composite tubing and sells and rents advanced in-line inspection equipment to makers of oil country tubular goods.

More recently, by applying its deep knowledge in technology, the Company has helped advance the transition toward sustainable energy.

NOV also manufactures coiled tubing, high-pressure fiberglass tubing, and sells and rents advanced in-line inspection equipment to makers of oil country tubular goods.

More recently, by applying its deep knowledge in technology, the Company has helped advance solutions supporting alternative forms of energy.

The Company has a long tradition of pioneering innovations which improve the cost-effectiveness, efficiency, safety, and environmental impact of oil and gas operations.

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“Risk Factors”.

In an effort to drive further operational and financial efficiencies, the Company consolidated NOV’s operational structure into two segments, Energy Equipment and Energy Products and Services, effective January 1, 2024.

Prior to January 1, 2024, the Company conducted its operations through three business segments:

Wellbore Technologies, Completion & Production Solutions, and Rig Technologies.

Segment disclosures pertaining to prior periods have been restated to reflect the change in reportable segments.

“Business”, for a discussion of each of these business segments.

Unless indicated otherwise, results of operations are presented in accordance with accounting principles generally accepted in the United States (“GAAP”).

Certain reclassifications have been made to the prior year financial statements to conform with the 2025 presentation.

The Company discloses Adjusted EBITDA (defined as operating profit excluding depreciation, amortization, gains and losses on sales of fixed assets and, when applicable, Other Items (as defined below under “Executive Summary”)) in its periodic earnings press releases and other public disclosures to provide investors additional information about the results of ongoing operations.

The Company discloses Adjusted Operating Profit (defined as Operating Profit excluding gains and losses on sales of fixed assets, and, when applicable, pre-tax Other Items (as defined below under “Executive Summary”)) and Adjusted EBITDA (defined as Operating Profit excluding depreciation, amortization, gains and losses on sales of fixed assets, and, when applicable, pre-tax Other Items) in its periodic earnings press releases and other public disclosures to provide investors additional information about the results of ongoing operations.

See Non-GAAP Financial Measures and Reconciliations in Results of Operations for an explanation of our use of non-GAAP financial measures and reconciliations to their corresponding measures calculated in accordance with GAAP.

Operating Environment Overview

NOV’s results are dependent on, among other things, the level of worldwide oil and gas drilling, well remediation activity, the price of crude oil and natural gas, capital spending by exploration and production companies and drilling contractors, worldwide oil and gas inventory levels and, to a lesser degree, the level of investment in wind, solar and geothermal energy products.

Key industry indicators for the past three years include the following:

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The following table details the U.S., Canadian, and international rig activity and West Texas Intermediate Oil prices for the past nine quarters ended December 31, 2025 on a quarterly basis.

During the third quarter of 2025, Baker Hughes updated its methodology for calculating rig counts in the Kingdom of Saudi Arabia effective for periods beginning January 2024.

Prior-period international rig count data has been restated to reflect this change.

Baker Hughes, Inc.

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The average price per barrel of West Texas Intermediate Crude was $65.46 in 2025, a decrease of 14.5% over the average price for 2024 of $76.55 per barrel.

The average natural gas price in 2024 was $2.19 per mmbtu, a decrease of 14% compared to the 2023 average of $2.54 per mmbtu.

Average rig activity worldwide decreased 5% for the full-year in 2024 compared to 2023.

The average natural gas price in 2025 was $3.53 per mmbtu, an increase of 61.2% compared to the 2024 average of $2.19 per mmbtu.

Average rig activity worldwide a decrease of 6.6% for the full-year in 2025 compared to 2024.

The average crude oil price for the fourth quarter of 2025 was $59.64 per barrel, and natural gas was $3.75 per mmbtu.

At January 31, 2025, there were 840 rigs actively drilling in North America, comprised of U.S.

and Canada, compared to the fourth quarter average of 781 rigs, an increase of 8 percent.

The price for West Texas Intermediate Crude Oil was $72.53 per barrel at January 31, 2025, an increase of 3 percent from the fourth quarter of 2024 average.

The price for natural gas was $3.04 per mmbtu at January 31, 2025, an increase of 25 percent from the fourth quarter of 2024 average.

The Company is also becoming increasingly engaged with energy transition related opportunities and is currently involved in projects related to wind energy, solar, geothermal power, rare earth metal extraction, biogas production, and carbon sequestration.

Additionally, the Company is investing in developing technologies and solutions that will support other energy transition related industry verticals.

Management expects to see continued growth in these areas as low carbon power becomes a larger portion of the global energy supply.

As of February 6, 2026, there were 779 rigs actively drilling in North America, comprised of U.S.

and Canada, compared to the fourth quarter of 2025 average of 733 rigs, an increase of 6 percent.

The price for West Texas Intermediate Crude Oil was $63.55 per barrel at February 6, 2026, an increase of 7 percent from the fourth quarter of 2025 average.

The price for natural gas was $3.42 per mmbtu at February 6, 2026, a decrease of 9 percent from the fourth quarter of 2025 average.

EXECUTIVE SUMMARY

NOV generated revenue of $8.87 billion in 2024, due to improving quality of our capital equipment backlog, market share gains from new, higher margin technologies and services, and operational efficiencies that more than offset the effect of lower drilling activity.

For the year ended December 31, 2024, the Company reported net income attributable to the Company of $635 million, a decrease of $358 million from $993 million in 2023, which included the release of valuation allowances on deferred tax assets of $485 million.

Operating profit increased 35 percent to $876 million, or 9.9 percent of sales for the full-year 2024.

Adjusted EBITDA increased 11 percent to $1.11 billion or 12.5 percent of sales for 2024.

NOV generated revenue of $8.74 billion in 2025, a 1% decline from prior year despite a 7% decrease in global activity levels due to increased demand for offshore capital equipment.

For the year ended December 31, 2025, the Company reported net income attributable to the Company of $145 million, a decrease of $490 million from 2024, reflecting lower levels of operating profit, a higher effective tax rate from valuation allowances on deferred tax assets, and a higher mix of foreign earnings.

Operating profit was $494 million and adjusted operating profit was $674 million, compared to operating profit of $876 million and adjusted operating profit of $767 million in the prior year.

Adjusted EBITDA decreased $81 million to $1.03 billion, or 11.8 percent of sales for the full-year 2025.

For the fourth quarter ended December 31, 2025, revenue was $2.28 billion, a decrease of 1 percent compared to the fourth quarter of 2024.

Net income decreased $438 million, or $1.10 per diluted share, year-over-year from $598 million, which included the release of valuation allowances on deferred tax assets of $485 million.

Operating profit increased 29 percent to $207 million, or 9.0 percent of sales.

The Company recorded $7 million in pre-tax charges within Other Items, primarily related to severance and facility closure costs.

Adjusted EBITDA increased 3 percent year-over-year to $302 million, or 13.1 percent of sales.

Net income decreased $238 million, or $0.62 per diluted share, year-over-year from $160 million, primarily due to a higher effective tax rate from valuation allowances on deferred tax assets, a higher mix of foreign earnings, and an increase in pre-tax Other Items.

Operating profit was $92 million and adjusted operating profit was $177 million, compared to operating profit of $207 million and adjusted operating profit of $214 million in the fourth quarter of 2024.

Adjusted EBITDA decreased $35 million year-over-year to $267 million, or 11.7 percent of sales.

Segment Performance

Energy Products and Services

Energy Products and Services generated revenues of $1.06 billion in the fourth quarter of 2024, a decrease of 1 percent from the fourth quarter of 2023.

Operating profit increased $18 million from the prior year to $112 million, or 10.6 percent of sales, and included $3 million in Other Items.

Energy Products and Services generated revenues of $989 million in the fourth quarter of 2025, a decrease of 7 percent from the fourth quarter of 2024.

Operating profit decreased $39 million from the prior year to $73 million, or 7.4 percent of sales, and included $7 million in pre-tax Other Items.

Adjusted EBITDA decreased $33 million from the prior year to $140 million, or 14.2 percent of sales.

The decrease in revenue and Adjusted EBITDA was primarily due to lower levels of global drilling activity, but this was partially offset by growing adoption of the Company’s new technologically advanced product offerings.

Lower revenues reflected reduced global activity, partially offset by market share gains.

Profitability was further impacted by increased tariffs and inflationary pressures.

Energy Equipment

Energy Equipment generated revenues of $1.29 billion in the fourth quarter of 2024, a decrease of 1 percent from the fourth quarter of 2023.

The decline in revenue was due primarily to the divestiture of the Company’s Pole Products business in early 2024 and lower revenue from aftermarket support;

however, this was mostly offset by higher revenue from the segment’s growing backlog.

Operating profit increased $31 million from the prior year to $152 million, or 11.8 percent of sales, and included $4 million in Other Items.

Adjusted EBITDA increased $38 million from the prior year to $185 million, or 14.4 percent of sales.

Profitability improved due to strong execution on higher margin projects from the segment’s backlog.

New orders booked during the quarter totaled $757 million, representing a book-to-bill of 121 percent when compared to the $628 million shipped from backlog.

As of December 31, 2024, backlog for capital equipment orders for Energy Equipment was $4.43 billion, an increase of $279 million from the fourth quarter of 2023.

Energy Equipment generated revenues of $1.33 billion in the fourth quarter of 2025, an increase of 4 percent from the fourth quarter of 2024.

Operating profit decreased $45 million from the prior year to $107 million, or 8.0 percent of sales, and included $46 million in pre-tax Other Items.

Adjusted EBITDA decreased $5 million from the prior year to $180 million, or 13.5 percent of sales.

Revenues benefited from strong execution on backlog, while lower demand for aftermarket spare parts and services led to a less favorable sales mix.

New orders booked during the quarter totaled $532 million, a decrease of $225 million when compared to the $757 million of new orders booked during the fourth quarter of 2024.

Orders shipped from backlog were $728 million, representing a book-to-bill of 73 percent, compared to the $628 million orders shipped and a 121 percent book-to-bill for the fourth quarter of 2024.

As of December 31, 2025, backlog for capital equipment orders for Energy Equipment totaled $4.34 billion, a decrease of $93 million from $4.43 billion in fourth quarter of 2024.

Oil & Gas Equipment and Services Market and Outlook

The macro environment and geopolitical uncertainties continue to drive volatility and pressure commodity prices, with oil prices reflecting growing concerns regarding diminishing demand from weakening global economies, excess OPEC capacity, and rising non-OPEC production.

These concerns along with ample supplies of natural gas in North America are increasing cautiousness among oil and gas producers, resulting in lower drilling activity in the U.S.

land market and are beginning to affect shorter-cycle activity in international markets.

Despite growing concerns that global oil and U.S.

natural gas markets may be oversupplied in 2025, management believes commodity prices and activity levels should remain relatively rangebound, with any pullback in activity short-lived, and that the industry remains in an extended recovery due to:

(1) current inventory levels in relation to OECD demand that are lower than historical averages;

(2) natural oil production decline rates that average almost 15 percent;

(3) anticipated increases in LNG exports from the U.S.;

(4) increasing focus on energy security;

and (5) capital discipline across the industry, which has diminished the global oil and gas industry’s ability to easily ramp production.

Regardless of the operating environment, NOV remains committed to improving organizational efficiencies while focusing on the development and commercialization of innovative products and services, including technologies to reduce the environmental impact of oil and gas operations, and technologies to improve the economics of alternative energy that are responsive to the longer-term needs of NOV’s customers.

We believe this strategy will further advance the Company’s competitive position in all market conditions.

Macroeconomic uncertainties remain elevated due to geopolitical events, changes to trade policies, and the decision by OPEC+ to return larger than anticipated quantities of oil to the market.

These factors are raising concerns for both supply and demand related challenges to global commodity markets, resulting in lower oil prices, significant market volatility, and greater uncertainty.

Current market conditions present a difficult environment for making capital investment decisions, and the short-term outlook remains uncertain, with clearer downside risk than upside.

However, management does not expect near-term volatility to affect broader industry trends including:

(1) offshore and international resources becoming the primary source for future incremental supplies of oil to meet global demand;

(2) growing focus on natural gas from deepwater and unconventional resources to meet growing global demand for power;

and (3) the application of emerging technologies to drive efficiencies and productivity in energy operations.

NOV remains focused on the development and commercialization of innovative products and services that lower the marginal cost and environmental footprint of energy production.

We believe this strategy along with continued efforts to improve organizational efficiencies will further advance the Company’s competitive position in any market environment.

Results of Operations

The following table summarizes the Company’s revenue and operating profit by operating segment (in millions):

The following table summarizes the Company’s revenue, operating profit, and adjusted operating profit by operating segment (in millions):

Year Ended December 31,

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Total operating profit %

Adjusted operating profit:

Energy Products and Services

Energy Equipment

Eliminations and corporate costs

Total adjusted operating profit

Adjusted operating profit %:

Energy Products and Services

Energy Equipment

Total adjusted operating profit %

Years Ended December 31, 2025 and December 31, 2024

Energy Products and Services

Revenue from Energy Products and Services for the year ended December 31, 2024 was $4.13 billion, an increase of $53 million, or 1 percent, compared to the year ended December 31, 2023.

North American revenue increased 4 percent despite the decline in drilling activity primarily due to the acquisition of our artificial lift business and market share gains, while international revenue declined 1 percent primarily due to lower sales of drill pipe and conductor pipe connections.

Revenue from Energy Products and Services for the year ended December 31, 2025 was $3.98 billion, a decrease of $153 million, or 4 percent, compared to the year ended December 31, 2024.

International revenue decreased 13 percent consistent with the decrease in international rig count, while North American revenue increased 4 percent on higher service and rental activity due to accelerating market adoption of newer performance technologies.

Operating profit from Energy Products and Services was $277 million for the year ended December 31, 2025, a decrease of $198 million compared to the year ended December 31, 2024.

Operating profit percentage for 2025 was 7.0 percent compared to an operating profit percentage of 11.5 percent in 2024.

The decrease in profitability was due to a less favorable sales mix and a 21 percent decline in sales of drill pipe for the year ended December 31, 2024, when compared to the prior year.

Included in operating profit are Other Items related to severance, facility closure costs, and other charges and credits.

Other Items included in operating profit for Energy Products and Services were $7 million for the year ended December 31, 2024 and $53 million for the year ended December 31, 2023.

The decrease in profitability was due to a less favorable sales mix, tariffs and other inflationary pressures experienced throughout the year, and an increase in pre-tax Other Items compared to prior year.

Pre-tax Other Items included in operating profit for Energy Products and Services were $59 million for the year ended December 31, 2025 and $7 million for the year ended December 31, 2024.

Pre-tax Other Items in the current year were primarily due to timing related discounts on royalty receivables currently in litigation (see Note 14 to the Consolidated Financial Statements for further discussion), charges incurred for the write-down of certain inventory associated with facility closures and discontinued product lines, and severance charges associated with facility consolidations.

Energy Equipment

Revenue from Energy Equipment for the year ended December 31, 2025 was $4.93 billion, an increase of $46 million, or 1 percent, compared to the year ended December 31, 2024.

The increase in revenue is attributable to higher sales in international offshore markets.

Revenue improved from international sales by 8 percent and offshore sales increased by 10 percent for the year ended December 31, 2024, when compared to the prior year.

The increase in sales to these markets is a result of strong demand for aftermarket products and services and execution on the segment’s improving capital equipment backlog.

Revenues in North America declined 3 percent year-to-date when compared to the prior year, primarily due to the divestiture of the segment’s Pole Products business during the second quarter of 2024.

Operating profit from Energy Equipment was $608 million for the year ended December 31, 2024, an increase of $237 million compared to the year ended December 31, 2023.

The increase in revenue is attributable to higher sales in international offshore markets despite the decrease in rig count.

Revenue improved from international sales by 4 percent and offshore sales increased by 9 percent for the year ended December 31, 2025, when compared to the prior year, as a result of strong execution on backlog.

The increases in international and offshore sales, were offset by decline in sales of aftermarket parts and services.

Operating profit from Energy Equipment was $493 million for the year ended December 31, 2025, a decrease of $115 million compared to the year ended December 31, 2024.

Operating profit percentage for 2025 was 10.0 percent compared to operating profit percentage of 12.4 percent in 2024.

Higher profitability for the year ended December 31, 2024 was the result of higher margin sales primarily driven by improved demand for aftermarket products and services and strong execution on the segment’s improving capital equipment backlog.

A $130 million gain from the divestiture of the segment’s Pole Products business in the second quarter of 2024 also contributed to the increase in profitability for the current year.

Included in operating profit are Other Items related to the gain on the divestiture of the segment’s Pole Products business, gains on sales of previously reserved inventory, severance, facility closure costs, and other charges and credits.

Other items included in operating profit for Energy Equipment was a net credit of $118 million for the year ended December 31, 2024 and a net credit of $14 million for the year ended December 31, 2023.

The decrease in profitability for the year ended December 31, 2025, was primarily due to the $130 million gain from the divestiture of the segment’s Pole Products business in the second quarter of 2024 partially offset by strong execution in the current year on the segment’s capital equipment backlog.

Pre-tax Other Items included in operating profit for Energy Equipment were $79 million for the year ended December 31, 2025 and a net credit of $118 million for the year ended December 31, 2024.

Pre-tax Other Items in the current year were primarily related to goodwill and long-lived asset impairments, severance, and facility closure costs.

The Energy Equipment segment monitors its capital equipment backlog to plan its business.

New orders are added to backlog only when the Company receives a firm written order for major completion and production components or a contract related to a construction project.

The capital equipment backlog was $4.43 billion at December 31, 2024, an increase of $279 million, or 7 percent, from backlog of $4.15 billion at December 31, 2023.

New orders are added to backlog only when the Company receives a firm written order for longer-term major components or a construction project.

The capital equipment backlog was $4.34 billion at December 31, 2025, a decrease of $93 million, or 2 percent, from backlog of $4.43 billion at December 31, 2024.

Although numerous factors can affect the timing of revenue out of backlog (including, but not limited to, customer change orders and supplier accelerations or delays), the Company reasonably expects approximately 49 percent of backlog to become revenue during 2026 and the remainder thereafter.

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Intrasegment transactions are eliminated within each segment.

Eliminations remained flat when compared to 2023, while corporate costs declined 6 percent due to our cost savings initiatives and workforce reductions taken in 2023.

Eliminations increased 7 percent when compared to 2024 on higher activity, while corporate costs increased 51 percent.

Corporate costs included $45 million in pre-tax Other Items for the year ended December 31, 2025, compared to $2 million in the prior year.

Pre-tax Other Items in the current year primarily related to non-recurring charges for impairment of long-lived assets and the deconsolidation of our Russian subsidiaries.

Interest and financial costs and Interest income

Interest and financial costs were $88 million for the year ended December 31, 2025 compared to $91 million for the year ended December 31, 2024.

The increase in interest and financial costs were primarily due to debt borrowings on the revolving credit facility in the first quarter of 2024.

The decrease in interest and financial costs were primarily due to debt borrowings on the revolving credit facility in the prior year.

Interest income was $51 million for the year ended December 31, 2025 compared to $38 million for the year ended December 31, 2024.

The increase was primarily related to interest earned on larger cash balances in the current year compared to prior year.

Equity income in unconsolidated affiliates

Equity income in unconsolidated affiliates was $36 million for the year ended December 31, 2024 compared to $119 million for the year ended December 31, 2023.

A less favorable product sales mix and lower volume in sales led to lower profitability year-over-year for our largest investment in unconsolidated affiliates.

The increase was primarily related to interest earned on larger cash balances and tax refunds in the current year compared to prior year.

Equity income (loss) in unconsolidated affiliates

Equity income (loss) in unconsolidated affiliates was $(16) million for the year ended December 31, 2025 compared to $36 million for the year ended December 31, 2024.

Sales for our largest investment in unconsolidated affiliates declined 30 percent compared to prior year.

The decline in sales is primarily due to pricing pressures and lower volume for oil country tubular goods, as well as higher cost for labor and materials, which led to lower profitability year-over-year.

Other expense, net

Other expense, net was $66 million for the year ended December 31, 2025 compared to $28 million for the year ended December 31, 2024.

The decrease in expense was primarily due to larger foreign currency fluctuations in the prior year, particularly with the currency devaluation in Argentina.

The increased in expense was primarily due to larger foreign currency fluctuations in the current year affecting multiple currencies.

Provision for income taxes

The effective tax rate for the year ended December 31, 2025 was 59.7 percent, compared to 23.6 percent for 2024.

For the year ended 2024, the effective tax rate was negatively impacted by increased withholding taxes, nondeductible expenses, and losses in certain jurisdiction with no tax benefit, partially offset by a lower rate of U.S.

tax on certain earnings generated outside of the United States and the release of valuation allowances in certain jurisdictions with net operating losses as a result of improving forecasted taxable income.

During 2023, the Company determined it was more likely than not that the Company would be able to realize the benefit of a substantial portion of the deferred tax assets in the United States and the majority of its other international jurisdictions and released valuation allowances on certain deferred tax assets.

The effective tax rate was favorably impacted by the adjustments related to utilization of losses and tax credits for current and prior year tax returns, partially offset by current year losses in certain jurisdictions with no tax benefit.

For 2025, the effective tax rate was negatively impacted by the establishment of additional valuation allowances for foreign tax credit carryforwards and losses in certain jurisdictions, an unfavorable earnings mix including withholding taxes in higher tax rate jurisdictions, and the impairment of nondeductible goodwill, partially offset by the release of reserves for unrecognized tax benefits.

For 2024 the effective tax rate was negatively impacted by increased withholding taxes, nondeductible expenses, and losses in certain jurisdictions with no tax benefit, partially offset by a lower rate of U.S.

tax on global intangible low-taxed income (GILTI) and the deduction of foreign-derived intangible income (FDII) and the release of valuation allowances in certain jurisdictions as a result of improving forecasted taxable income and availability of net operating losses.

Results of Operations in 2024 Compared to 2023

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In addition, these non-GAAP financial measures are not a substitute for financial measures prepared in accordance with GAAP and should therefore be considered only as supplemental to such GAAP financial measures.

The Company defines Adjusted EBITDA as operating profit excluding depreciation, amortization, gains and losses on sales of fixed assets and, when applicable, Other Items.

Adjusted EBITDA % is a ratio showing Adjusted EBITDA as a percentage of sales.

The Company defines Adjusted Operating Profit as Operating Profit excluding gains and losses on sales of fixed assets, and, when applicable, pre-tax Other Items.

The Company defines Adjusted EBITDA as Operating Profit excluding depreciation, amortization, gains and losses on sales of fixed assets, and, when applicable, pre-tax Other Items.

Adjusted Operating Profit % is a ratio showing Adjusted Operating Profit as a percentage of sales and Adjusted EBITDA % is a ratio showing Adjusted EBITDA as a percentage of sales.

Management believes this is important information to provide because it is used by management to evaluate the Company’s operational performance and trends between periods and manage the business.

Management also believes this information may be useful to investors and analysts to gain a better understanding of the Company’s results of ongoing operations.

Adjusted EBITDA and Adjusted EBITDA % are not intended to replace GAAP financial measures, such as Net Income and Operating Profit %.

Adjusted Operating Profit, Adjusted Operating Profit %, Adjusted EBITDA, and Adjusted EBITDA % are not intended to replace GAAP financial measures, such as Net Income and Operating Profit %.

Additionally, Excess Free Cash Flow is defined as cash flows from operations less capital expenditures and other investments, including acquisitions and divestitures.

Excess Free Cash Flow does not represent the Company’s residual cash flow available for discretionary expenditures, as the calculation of these measures does not account for certain debt service requirements or other non-discretionary expenditures.

Other items consist of charges and credits related to (in millions):

Pre-tax Other Items consist of charges and credits related to (in millions):

Three Months Ended

September 30,

Other items by category:

Russia impairment and other charges

Voluntary early retirement program

Royalty discount

Pre-tax Other Items by category:

Goodwill and long-lived asset impairment

Royalty timing discount

Business divestiture

Severance, facility closures and other

Total other items

Severance, facility closures and other restructuring activities

Total pre-tax Other Items

The following tables set forth the reconciliation of Adjusted EBITDA to its most comparable GAAP financial measures (in millions):

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Total operating profit %

Other Items, net:

Pre-tax Other Items, net:

Energy Products and Services

Energy Equipment

Total other items

Total pre-tax Other Items

(Gain) loss on sales of fixed assets

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Total (gain) loss on sales of fixed assets

Adjusted operating profit:

Energy Products and Services

Energy Equipment

Eliminations and corporate costs

Adjusted operating profit

Depreciation & amortization:

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Total Adjusted EBITDA %

Three Months Ended

September 30,

Reconciliation of Adjusted EBITDA:

GAAP net income attributable to Company

GAAP net income (loss) attributable to Company

Noncontrolling interests

Provision (benefit) for income taxes

Provision for income taxes

Interest expense

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Depreciation and amortization

Other Items, net:

Pre-tax Other Items, net

Total Adjusted EBITDA

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are greater than available cash balances that are not subject to income tax, rather than repatriating cash, the Company may choose to borrow against its revolving credit facility.

On September 12, 2024, the Company entered into a new $1.5 billion five-year unsecured revolving credit facility.

This new credit facility replaced the Company’s previous $2.0 billion revolving credit facility.

The Company has a five-year unsecured revolving credit facility with a borrowing capacity of $1.5 billion, which matures on September 12, 2029.

The Company has the right to increase the aggregate commitments under this new agreement to an aggregate amount of up to $2.5 billion upon the consent of only those lenders holding any such increase.

Interest under the multicurrency facility is based upon Secured Overnight Financing Rate (SOFR), Euro Interbank Offered Rate (EURIBOR), Sterling Overnight Index Average (SONIA), Canadian Overnight Repo Rate Average (CORRA), or Norwegian Interbank Offered Rate (NIBOR), plus 1.25% subject to a ratings-based grid or the U.S.

The new credit facility contains a financial covenant establishing a maximum debt-to-capitalization ratio of 60%.

As of December 31, 2024, the Company was in compliance with a debt-to-capitalization ratio of 23.8% and had no outstanding letters of credit issued under the facility, resulting in $1.5 billion of available funds.

A consolidated joint venture of the Company borrowed $120 million against a $150 million bank line of credit for the construction of a facility in Saudi Arabia.

The credit facility contains a financial covenant establishing a maximum debt-to-capitalization ratio of 60%.

As of December 31, 2025, the Company was in compliance with this covenant, with a debt-to-capitalization ratio of 23.8% and had no outstanding borrowing or letters of credit issued under the facility, resulting in $1.5 billion of available funds.

A consolidated joint venture of the Company borrowed $120 million against a $150 million bank line of credit, payable by June 2032, for the construction of a facility in Saudi Arabia.

Interest under the bank line of credit is based upon SOFR plus 1.40%.

The bank line of credit contains a financial covenant regarding maximum debt-to-equity ratio of 75%.

As of December 31, 2024, the joint venture was in compliance.

The facility construction was completed in the fourth quarter of 2022, and the joint venture will not have future borrowings on the line of credit.

The line of credit repayment schedule began in December 2022 with final payment no later than June 2032.

As of December 31, 2025, the joint venture was in compliance, and will not have future borrowings on the line of credit.

As of December 31, 2025, the Company has a carrying value of $84 million in borrowings related to this line of credit.

The Company has $11 million in payments related to this line of credit due in the next twelve months.

The Company can repay the entire outstanding facility balance without penalty at its sole discretion.

The Company’s outstanding debt at December 31, 2025 consisted primarily of $1,092 million in 3.95% Senior Notes, $497 million in 3.60% Senior Notes, and other debt of $129 million.

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Year Ended December 31,

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Net cash used in investing activities

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Significant uses and sources of cash during 2025:

• Cash flows provided by operating activities were $1.30 billion, primarily driven by higher levels of profitability and changes in the primary components of our working capital (inventories, contract assets, receivables, and accounts payable).

• Cash flows provided by operating activities were $1.25 billion, primarily driven by profitability and changes in the primary components of our working capital (inventories, contract assets and liabilities, receivables, and accounts payable).

• Capital expenditures were $375 million.

• Business acquisitions, net of cash acquired, were $298 million.

• Business divestitures, net of cash disposed, were $176 million.

• Payments of $108 million in dividends to our shareholders.

• Dividend payments to our shareholders were $190 million.

• Share repurchases were $315 million.

The effect of the change in exchange rates on cash was a decrease of $13 million for the year ended December 31, 2024, no change for the year ended December 31, 2023, and a decrease of $9 million for the years ended December 31, 2022.

The effect of the change in exchange rates on cash was an increase of $17 million for the year ended December 31, 2025, a decrease of $13 million for the year ended December 31, 2024, and no change for the year ended December 31, 2023.

We believe that cash on hand, cash generated from operations and amounts available under our credit facilities and from other sources of debt will be sufficient to fund operations, working capital needs, capital expenditure requirements, dividends and financing obligations for the foreseeable future.

During the three months ended December 31, 2024, the Company repurchased 7.5 million shares of common stock under its share repurchase program for an aggregate amount of $112 million.

During the year ended December 31, 2025, the Company repurchased 22.8 million shares of common stock under its share repurchase program for an aggregate amount of $315 million.

The Company expects to return at least 50% of Excess Free Cash Flow (defined as cash flows from operations less capital expenditures and other investments, including acquisitions and divestitures), through a combination of steady, quarterly base dividends, opportunistic stock buybacks, and an annual supplemental dividend to true-up returns to shareholders on an annual basis.

During the year ended December 31, 2024, the Company repurchased 14.2 million shares of common stock under the program for an aggregate amount of $229 million.

The Company expects to return at least 50% of Excess Free Cash Flow (defined as cash flows from operations less capital expenditures and other investments, including acquisitions and divestitures), through a combination of quarterly base dividends, stock buybacks, and if needed, an annual supplemental dividend to true-up returns to shareholders on an annual basis.

We may pursue additional acquisition candidates, but the timing, size or success of any acquisition effort and the related potential capital commitments cannot be predicted.

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This represents the tax benefits associated with various tax positions taken, or expected to be taken, on domestic and international tax returns that have not been recognized in our financial statements due to uncertainty regarding their resolution.

Due to the uncertainty of the timing of future cash flows associated with these unrecognized tax benefits, we are unable to make reasonably reliable estimates of the period of cash settlement, if any, with the respective taxing authorities.

For further information related to unrecognized tax benefits, see Note 15 to the Consolidated Financial Statements.

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Right to payment is enforceable for performance completed to date, including a reasonable profit.

Because of control transferring over time, revenue is recognized based on the extent of progress towards completion of the performance obligation.

We generally use the cost-to-cost (input) measure of progress for our contracts because it best depicts the transfer of assets to the customer which occurs as we incur costs.

Estimating total revenue and cost at completion of long-term construction contracts is complex, subject to many variables and requires significant judgment.

Under the cost-to-cost measure of progress, progress towards completion of each contract is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation.

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Any expected losses on a project are recorded in full in the period in which the loss becomes probable.

These long-term construction contracts generally include integrating a complex set of tasks and components into a single project or capability, so are accounted for as one performance obligation.

These long-term construction contracts generally include integrating a complex set of tasks and components into a single project or capability, so they are accounted for as one performance obligation.

Estimating total revenue and cost at completion of long-term construction contracts is complex, subject to many variables and requires significant judgment.

It is common for our long-term contracts to contain late delivery fees, work performance guarantees, and other provisions that can either increase or decrease the transaction price.

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Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based on an assessment of our anticipated performance and historical, current and forecasted information that is reasonably available to us.

Net revenue recognized from performance obligations satisfied in previous periods was $19 million for the year ended December 31, 2024 primarily due to change orders.

Net revenue recognized from performance obligations satisfied in previous periods was $5 million and $19 million for the years ended December 31, 2025 and 2024, respectively, primarily due to change orders.

Goodwill represents the excess of acquisition price paid over the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed.

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However, if the Company concludes otherwise, then it is required to perform a quantitative assessment.

If and when the Company performs a quantitative assessment, it is based on the Company’s discounted cash flow analysis.

For the year ended December 31, 2025, the Company elected to bypass the qualitative assessment and proceed directly to a quantitative impairment test for each reporting unit.

When the Company performs a quantitative assessment, it estimates the fair value of its reporting units using a discounted cash flow analysis.

The discounted cash flow is based on management’s forecast of operating performance for each reporting unit.

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During times of volatility, significant judgment must be applied to determine whether credit changes are a short-term or long-term trend.

The Company elected to first perform the qualitative assessment described above for the purposes of its annual goodwill impairment test in 2024.

Based on the results of the assessment, the Company concluded it was more likely than not that the fair value of each of its reporting units was greater than its carrying amount and no further testing was performed.

Based on the results of the quantitative assessment performed as of October 1, 2025, the Company recorded $40 million in impairment charges to goodwill related to our Renewables reporting unit during the year ended December 31, 2025.

See Note 6 to the Consolidated Financial Statements for further discussion.

Inventory Reserves

Inventory is carried at the lower of cost or estimated net realizable value.

Inventory is carried at the lower of cost or estimated net realizable value using the first-in, first-out or average cost methods.

Inventories consist of raw materials and supplies, work-in-process and finished goods and purchased products.

The Company reviews historical usage of inventory on-hand, assumptions about future demand and market conditions, current cost and estimates about potential alternative uses, which are limited, to estimate net realizable value.

The Company’s inventory consists of finished goods, spare parts, work in process, and raw materials to support ongoing manufacturing operations and the Company’s large installed base of highly specialized oilfield equipment.

The Company’s estimated carrying value of inventory depends upon demand largely driven by levels of oil and gas well drilling and remediation activity, which depends in turn upon oil and gas prices, the general outlook for economic growth worldwide, available financing for the Company’s customers, political stability and governmental regulation in major oil and gas producing areas, and the potential obsolescence of various types of equipment we sell, among other factors.

During 2024, 2023, and 2022 we recorded inventory provision charges (credits) to inventory reserves of $31 million, $28 million, and $(18) million, respectively.

During 2025, 2024, and 2023 we recorded inventory provision charges to inventory reserves of $36 million, $31 million, and $28 million, respectively.

At December 31, 2025 and 2024, inventory reserves totaled $261 and $286 million, or 12.7% and 12.9% of gross inventory, respectively.

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Although the Company considered future taxable income in its assessment, the Company concluded that, as of December 31, 2023, a valuation allowance was still required for certain United States foreign tax credit carryforwards and deferred tax assets in certain other jurisdictions.

As of December 31, 2024, the Company has recorded valuation allowances of $266 million that the Company intends to maintain until it is more likely than not the deferred tax assets will be realized.

Income tax expense recorded in the future will be reduced to the extent of any additional decreases in the Company’s valuation allowances.

The Company increased the valuation allowance during 2025 from $266 million to $352 million to reflect its assessment that additional United States foreign tax credits carryforwards as well as deferred tax assets in certain other jurisdictions were not more likely than not to be realized.

Income tax expense recorded in the future will be reduced to the extent of any decreases in the Company’s valuation allowances.

The realization of remaining deferred tax assets is primarily dependent on future taxable income.

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See Note 2 to the Consolidated Financial Statements for further discussion on recently issued and recently adopted accounting standards.

Forward–Looking Statements

The Private Securities Litigation Reform Act of 1995 provides safe harbor provisions for forward-looking information.

Some of the information in this document contains, or has incorporated by reference, forward-looking statements.

Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements.

Forward-looking statements typically are identified by use of terms such as “may,” “believe,” “plan,” “will,” “expect,” “anticipate,” “estimate,” “should,” “forecast,” and similar words, although some forward-looking statements are expressed differently.

We may also provide oral or written forward-looking information in other materials we release to the public.

Forward-looking information involves risk and uncertainties and reflects our best judgment based on current information.

You should be aware that our actual results could differ materially from results anticipated in the forward-looking statements due to a number of factors, including but not limited to changes in oil and gas prices, customer demand for our products and worldwide economic activity, including matters related to recent Russian sanctions.

Cautionary Note Regarding Forward–Looking Statements

This document contains, or has incorporated by reference, statements that are not historical facts, including estimates, projections, and statements relating to our business plans, objectives, and expected operating results that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.

Such statements often contain words such as “may,” “can,” “likely,” “believe,” “plan,” “predict,” “potential,” “will,” “intend,” “think,” “should,” “expect,” “anticipate,” “estimate,” “forecast,” “expectation,” “goal,” “outlook,” “projected,” “projections,” “target,” and other similar words, although some such statements are expressed differently.

Other oral or written statements we release to the public may also contain forward-looking statements.

Forward-looking statements involve risk and uncertainties and reflect our best judgment based on current information.

You should be aware that our actual results could differ materially from results anticipated in such forward-looking statements due to a number of factors, including but not limited to changes in oil and gas prices, customer demand for our products, potential catastrophic events related to our operations, protection of intellectual property rights, compliance with laws, and worldwide economic activity, including matters related to recent Russian sanctions and changes in U.S.

trade policies, including the imposition of tariffs and retaliatory tariffs and their related impacts on the economy.

Given these uncertainties, current or prospective investors are cautioned not to place undue reliance on any such forward-looking statements.

We undertake no obligation to update any such factors or forward-looking statements to reflect future events or developments.

You should also consider carefully the statements under “Risk Factors” which address additional factors that could cause our actual results to differ from those set forth in the forward-looking statements, and additional disclosures we make in our press releases and Forms 10-Q, and 8-K.

You should also consider carefully the statements under “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” which address additional factors that could cause our actual results to differ from those set forth in the forward-looking statements, as well as additional disclosures we make in our press releases and other securities filings.

We also suggest that you listen to our quarterly earnings release conference calls with financial analysts.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis